Good afternoon, everyone. I am Kattiya Indaravijaya, CEO of KBank. Thank you for taking the time to join us today. I am pleased to be here today together with our President, Mr. Jongrak Rattanapian, our CFO, Khun Sansana Sukhanunth, and the investor relations team. Let me start by providing an overview of the current challenging operating environment and the strategic measures we are implementing to navigate these challenges. We are facing a very challenging operating environment and significant headwinds due to economic and geopolitical uncertainty. As a result, there are medium-term headwinds to our targets. However, we remain confident in the execution of our strategy and are therefore committed to achieving a double-digit ROE, although the timing of this achievement will depend on the macroeconomic conditions. Stability and resilience are more important under a slow-growth environment and medium-term headwinds.
Thus, we will strengthen our capital buffer with a medium-term CET1 of at least 15% and deliver sustainable total shareholder return (TSR) by raising our dividend payout to at least 50%, aiming at 50%-60% in the medium term, and potential for additional capital distribution depending on market conditions, financial performance, and capital level. Also, we remain fully committed to the disciplined execution of our strategy and have refined key elements to align with evolving circumstances and a dynamic environment while seeing a strong momentum across all the key focus areas: our 3+1 and PE strategy. The economic and geopolitical uncertainties have created numerous headwinds, and the Thai economy remains subdued. We expect GDP to grow 1.5% this year. The main downside risks come from a slowdown in tourism of 32.2 million people and high household debt.
We expect at least one additional rate cut in the second half of this year, which would bring the policy rate to 1.5%. There is also potential for the rate to decrease further. We would like to take you through the journey of our key economic assumptions from the inception of our strategy to where we are today. Since our base case strategy announcement in late 2023, there have been material changes in economic conditions, particularly GDP growth and interest rates. Thai GDP was initially forecasted to grow 3.1% in 2024, but actual growth was only 2.5%. Also, for this year, we initially expected a recovery to 3.7%. This has been revised down to just 1.5%, while the trade deal was more favorable than initially anticipated. The impact of the tariff is expected to intensify in 2026 and potentially put GDP on a downward trend.
Similarly, Thai policy rate expectations have come down from 2.5% to 2.25% in 2024, further down to 1.5% in 2025, and will decline further in 2026. The downward revision to these two key economic metrics has further downward implications on Thai exports, investment, private consumption, and tourism, which we are closely monitoring. Amid the negative implications from the broader operating environment and macro headwinds, we have been able to achieve stable asset quality and strong cost control. However, there are growing economic uncertainties in the future. This rate represents the result from the first half of this year, which we discussed with you on the recent quarterly analyst meeting. I will provide more information about dividend payout in the next slide. We are ensuring stability and resilience amid a worse-than-expected operating environment. We remain confident in our 3+1 strategic priorities and productivity enhancement, which will drive sustainable fundamental performance.
We, therefore, maintain our double-digit ROE target. Although the timing of achievement depends on the macroeconomic conditions, we will secure our balance sheet and capital strength to ensure resilience through macroeconomic uncertainty and the upcoming Basel III reform. As such, we will raise our CET1 target to at least 15% in the medium term, with an aspiration to maintain a range of 13%-15% when growth and economic conditions improve. Shareholders' returns remain our top priority, and we are committed to delivering sustainable total shareholder returns. Our payout will be at least 50%, aiming 50%-60% in the medium term. Also, we will consider additional capital distribution alternatives such as special dividends and buybacks, depending on market conditions, financial performance, and capital level, as mentioned earlier. We continue to execute on our K-ACE strategy with discipline and focus.
We continue to pursue our 3+1 and PE strategic priorities, which include reinvigorating credit performance, scaling capital-like fee income, strengthening sales and service models, and creating new revenue creation for medium term and long term, along with elevating innovation with data and AI, and enhancing productivity through strengthening our performance. We are confident that disciplined execution of our strategy will anchor our business on strong fundamentals. Coupled with effective capital management, it will enable us to achieve our double-digit ROE target. The execution of our 3+1 and PE strategic priorities has already delivered strong progress and results. First, to reinvigorate credit performance, we have revamped our credit strategy focused on quality growth, along with enhancing end-to-end credit transformation. This is reflected in 97% of new bookings coming from existing customers, 90% from secure loans, and 92% from retail lending with monthly income more than THB 30,000.
As SMEs play a crucial role in driving economic growth, we continue to support them while focusing on quality and selective growth. We leverage big data and machine learning to develop sub-segmentation based on characteristics, business stage, performance, and industry outlook. This allows us to identify high-potential customers, personalize customer experience, tailor customer growth, credit, and payment, and strengthen their capability through retail programs, including K SME Care and K SME Sera. Second, we scale the capital-like fee income with holistic wealth advisory, competitive bank assurance products, and dominant digital payments. We maintain number one position in mutual funds, AUM, with 6.4% year-to-date growth, outperforming the market by elevating wealth management advisory with comprehensive and competitive investment and protection solutions tailored to align the preference and risk tolerance of customers.
We rank number two in bank assurance, new life premium, with 12% year-on-year growth, outperforming the market by using need-based insurance offerings across legacy, living benefits, and health planning to receive a strong market response. We continue to be number one position in digital payments, with growth opportunities in FX, merchant, and cross-border business. Third, sales and service models through a digital-first experience, supporting our number one digital payments with around 30% market share, number one overall brand net promoter score (NPS), and number one mobile banking users with 23.4 million users in K+. For +1, we have prepared to exhibit further revenue creation in the medium term and long term by assessing opportunities in collaboration with our partners and enhancing ecosystem solutions. While monitoring potential risks, we also focus on enhancing productivity across the entire value chain.
As a result of reinvigorating credit performance and focus on quality over quantity, overall asset quality was stable with an increasing coverage ratio. However, asset quality remained challenging amid significant economic headwinds. Additional buffer has been added to safeguard against any volatilities. We continue to actively monitor our loan portfolio and apply proactive and dynamic asset quality management with a focus on high-quality credit growth. As a result of our efforts to scale capital-like fee income, net fee income still shows growth despite the challenges of market conditions. We would like to highlight three key segments driving fee income growth: credit, wealth, and payments. Credit-related fees contribute 24% of net fee income, declining in percent contribution from last year, reflecting loan contraction in line with moderating economic conditions and tightened credit policy. Amid slowing fee income, we remain number one position in credit card spending and card acceptance merchant services.
Wealth fee contribution remains stable at 37%, reflecting our continued leadership as number one position in mutual funds and number two in bancassurance, I mean, new life premium. Payment fees grow strongly, and the contribution rose to 39% from 37% last year, driven by trade services and bill payments. Our dominant position, with number one in K+, will further support digital payments from rising transaction volume and broader adoption across customer segments. The bank continues to shift towards quality loans and build resilience. NIMS in the second quarter dropped 10 basis points to 3.31%. Around 50% of the decline came from lower interest rates, around 20% from slight decline in loan growth, low yield from liquid assets but still generating net interest income, and the rest from the quality loan growth strategy and customer relief measures.
Also, asset repricing sensitivity is well matched to liability, and rate risks remain well managed. We continue to focus on cost and productivity improvements to support our overall operating profitability. We have maintained our cost-to-income within the target range and have reduced overall operating expense compared to last year. We have built a productivity-focused culture program across the bank and have already delivered positive results, including double-digit improvements in payments and channel cost per transaction, improved by double digits. Higher sales conversion rate with over 60% growth in digital sales of wealth management business. Credit process efficiency has also improved with strong control over collection and litigation costs. Tangible benefits from the productivity strategy have been realized across multiple areas from IT contract optimization, workforce streamlining, branch resizing, and to accelerate the digital migration and automation.
We will continue to enforce strict cost discipline, scale high-yield initiatives like AI, and centralize budgeting and dynamically align expenses to revenue trends to ensure sustainable profitability. We have a clear and prudent capital management framework, which will enhance capital efficiency and deliver sustainable shareholder returns. As mentioned, we made a strategic decision to uplift our medium-term CET1 target to at least 15% to provide a greater buffer amid uncertainty, including 1%-2% expected impact from Basel III reform. Shareholders' returns remain our top priority. We commit to deliver sustainable total shareholders' return. We commit to dividend payout at least 50%, aiming 50%-60% payout in the medium term. Also, we will consider additional capital distribution alternatives such as special dividends and buybacks, depending on the market conditions, financial performance, and capital level.
To conclude, I would like to reiterate our continued focus on executing on our 3+1 strategic priorities and driving productivity improvements while strengthening the balance sheet through proactive asset quality management and resilient capital discipline. We are committed to delivering sustainable total shareholders' returns. This year is our 80th anniversary of operation. We have consistently been a driving force of Thailand's economic development, guided by our philosophy of being a bank of sustainability. We have demonstrated a strong track record of achieving solid financial performance through multiple economic cycles and challenges in the past. Therefore, we are confident and committed to delivering our double-digit ROE, although the timeline of achieving this goal will depend on evolving the macroeconomic conditions. Our disciplined growth will reinforce our market leadership and deliver sustainable returns to shareholders. Thank you.